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Census data show potential for rising demands on state government

Data from the 2010 census show a rising number of Minnesotans likely to need state-subsidized services ranging from nursing home care to extra help in school.

The most obvious change is that Minnesota's population is getting older, a trend that has broad implications for the state's budget. Besides creating the potential for more demand for state-subsidized health care, a growing older population in Minnesota can affect income tax revenues — retirees don't pay the income taxes they contributed to the state's coffers when they were working.

The question state leaders must answer is how to address the potential growing demands. But Republicans and Democrats are at an impasse over the state's two-year budget, let alone close to any consensus on how to address demographic shifts that could impact the state's budget for the long term.

The state's demography office is closed during the state government shutdown, but policy analysts around the state are poring over new census data released Thursday. In many local communities, the data will mirror trends for the state, where the population of people 65 or older has increased by 15 percent since 2000. The population growth rate overall is only about 8 percent, a slower rate than Minnesota saw in the 1990s.

The increase is even sharper for people 85 older: That population is up by nearly 25 percent since 2000. And Minnesota's largest age cohort — younger baby boomers in their mid-40s to mid-50s — will reach retirement age within the next 20 years, continuing the shift.

CENSUS CLUES

Aging matters to the state because it can impact who is paying income tax and how much they're paying, said Todd Graham, demographer for the Metropolitan Council.
"Different age groups will have a different earnings profile," Graham said. "Income goes way down when people retire."

At the same time, health care costs are higher for older people. Assuming not all of them will be able to cover their own costs, the demand for state-subsidized health care services will go up, according to projections by state economists and demographers.

Another clue about demands for state services lies in census data about Minnesota's racial diversity. The state has become more racially diverse in the last 10 years, and demographers said that's especially true among children. About 83 percent of Minnesotans were white, non-Hispanic for the 2010 census, compared to 88 percent in 2000. In 2010, only about 76 percent of children under 18 years old were non-Hispanic white, according to American Community Survey data.

Some of the growth in diversity comes from immigrants. People born outside of the U.S. make up nearly 7 percent of the state's population, compared to 5 percent 10 years ago. In 2010, about 10 percent of Minnesotans said they spoke a language other than English compared to 8.5 percent in 2000. That could have an impact on the K-12 education budget, because children in those households might need additional education services, said Barbara Ronningen, who recently retired as a researcher for the State Demographic Center.

"You'd require larger expenditures for teaching English to non-English speakers," she said, giving an example.

As more immigrants move to smaller cities and suburbs across Minnesota, school districts could find themselves serving a population they hadn't served before, Ronningen said.

Susan Brower, a researcher for the Wilder Foundation and the Minnesota Compass project, said growing diversity among Minnesota's young also matters because they're the state's future work force.

Minnesota is going from a ratio of five workers for every retiree in 2000 to three workers for every retiree in the next 20 years.

"Any gains will have to be in productivity, which is related to the education level of our work force. It's going to have to be better trained people," Brower said.

Brower and others are concerned about the achievement gap that exists between white students and students of color. "There's a huge disparity in educational attainment and achievement scores," she said.

The other thing affecting the state's children is poverty, which has increased in Minnesota, according to the American Community Survey. In 2000, about 11 percent of children up to age 4 lived in poverty, compared to about 16 percent now, said Craig Helmstetter, a Wilder Foundation researcher.

Some of that is due to the recession, but it's an important figure to watch, he said.

"Research shows that time spent in poverty as a child can have long lasting implications for that child," Helmstetter said. "It would be great if we had a pot of gold to spend on those young kids to avoid those long term implications. In fact, our state is facing the opposite."

WE KNOW THE TRENDS, NOW WHAT?

Minnesota is one of only a few states that has taken an in-depth look at how an aging population and other demographic trends will affect its revenue and budgeting, said Ronald Alt, a researcher for the Federation of Tax Administrators.

"Most states have not looked at the longer term, except for budgeting for pension liabilities," he said.

But there's a difference between studying a problem and acting on it.

"We've known about this for decades, yet we continue to not do anything about it," said Peter Nelson, a policy fellow with the Center for the American Experiment, a conservative Twin Cities-based think tank.

Nelson said the state's current budget deficit is likely due mostly to the recession, but there's a structural deficit that will continue to cause budget problems. Nelson said the path toward solving the structural deficit is identifying ways to spend government money more efficiently.

"We need to provide a better service at a lower cost," he said. "One of those ways could be paying for health care — moving us more toward reforms where instead of paying for volume for health care you pay for value."

But policy observers who lean farther to the left in the political spectrum say redesigning government is only part of the answer. Dane Smith, president of Growth & Justice, said putting more money in community and less in private hands will produce the kind of payoff Minnesotans expect.

"Kids who don't speak English, kids who are born in poverty, are going to need some extra help. We don't have any choice really because this is our work force for tomorrow. It costs money to help them," Smith said. "If we make the right investment in our kids, they'll be more productive, come up with innovation and the productivity that's always made Minnesota a prosperous place."